Why Gujarat NRE employees moved Supreme Court

As Gujarat NRE Coke (GNCL) is likely to face liquidation, its employees have moved the Supreme Court for consideration of the resolution plan, so that the bankrupt company may continue to operate as a going concern.

At the same time, holders of foreign currency convertible bonds (FCCBs) on Monday urged the Kolkata bench of the National Company Law Tribunal (NCLT) to consider sale of the company only as a going concern.

As Gujarat NRE Coke (GNCL) is likely to face liquidation, its employees have moved the Supreme Court for consideration of the resolution plan, so that the bankrupt company may continue to operate as a going concern. At the same time, holders of foreign currency convertible bonds (FCCBs) on Monday urged the Kolkata bench of the National Company Law Tribunal (NCLT) to consider sale of the company only as a going concern. “Here in this case, we have to work out a device through the employees, if it is possible. Otherwise, the company has to be sold on a going concern basis. Kindly, do not permit employments to be terminated or operations to be stopped,” Jishnu Saha, arguing on behalf of holders of FCCBs, urged a division bench of the tribunal. “Liquidation without disrupting its operations will ensure better value for the company,” Saha said. Apart from banks and financial institutions, four FCCB holders are also financial creditors of GNCL. Appearing before the division bench of the tribunal, comprising justices Vijai Pratap Singh and Jinan KR, Saha argued, “The workmen, as I understood, today morning filed their petition before the Supreme Court for consideration of their scheme so that the company may operate as a going concern. There are 1,100 workmen, while around 10,000 people are dependent on the company for their livelihood.”

According to Section 53 of the Insolvency and Bankruptcy Code (IBC), the order of repayment of liquidation proceeds includes insolvency resolution costs, secured creditors’ and workmen dues, wages to employees other than workmen, unsecured creditors, central and state government dues, preference shareholders and equity shareholders. The four FCCB holders of Gujarat NRE Coke — Far East Capital Fund, Investec Bank (Switzerland AG), Teatree Enterprise, and Tothill Ventures — have claimed dues of Rs 139.98 crore from the resolution professional.

For Gujarat NRE Coke, the moratorium of nine months for completion of the resolution process under corporate insolvency resolution proceedings (CIRP) expired on January 1, 2018. Notably, during the mandated 270 days under the CIRP, no resolution plan was approved by the committee of creditors (CoC) for the company. As the resolution professional (RP), Sumit Binani, received a proposed resolution plan from employees and workmen of the company on December 30, 2017, he could not consider that because of paucity of time. “Now, there is no resolution plan. So, as per provisions of the Section 33 of the IBC (Insolvency and Bankruptcy Code), the company will have to go into liquidation by an order of the NCLT,” Binani had told the tribunal on January 1.

“The company has returned to operational profits for the last two months. The market capitalisation of the company stands at more than Rs 300 crore. The banks holds around 30% equity in the company. Even today, the company is a going concern,” Saha said on Monday. The company owes lenders around Rs 4,600 crore. In FY17, the company reported a net loss of Rs 676 crore on Rs 541 crore in revenues.

Ratnanko Banerjee, counsel for the company’s workers, argued that under the provisions of the IBC, operations of the bankrupt firm could continue for the purpose of beneficial liquidation. “Carrying on the business will cause the maximum value during a possible liquidation and provide benefits to the workers,” Banerjee added. The tribunal will hear the case on Tuesday.